In re Yelverton
| Decision Date | 28 September 2012 |
| Docket Number | Case No. 1:11-cv-1627 (RLW),Case No. 1:11-cv-1649 (RLW) |
| Parties | In re: STEPHEN THOMAS YELVERTON, Debtor |
| Court | U.S. District Court — District of Columbia |
SUMMARY MEMORANDUM OPINION;
NOT INTENDED FOR PUBLICATION IN THE OFFICIAL REPORTERS
Presently before the Court are notices of appeal in two cases: 11-cv-1627 and 1; 11-cv-1649. In both cases, the debtor seeks review of the Bankruptcy Court's decision denying a "Joint Motion to Vacate Discharge Order to Approve Reaffirmation Agreement." For the reasons set forth below, the Court will affirm the Bankruptcy Court's decision and dismiss the debtor's appeals.
Although proceeding pro se, debtor Stephen Thomas Yelverton is an attorney. On May 14, 2009, Yelverton filed a voluntary Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the District of Columbia. (Case # 9-bk-414.) On August 10, 2009, Melody H. Fennel commenced an Adversary Proceeding in the Bankruptcy Court seeking adetermination that a $55,000 personal loan she made to Yelverton was non-dischargeable. (Case # 09-ap-10021.) On January 28, 2010, Yelverton filed a motion seeking dismissal of the adversary proceeding, noting that he had proposed a Plan of Reorganization and that his debt to Fennel "ha[d] been affirmed and proposed to be paid in full." (9-ap-10021, Doc. 18.) The motion was denied and later that summer, on August 18, 2010, he filed another motion to dismiss raising essentially the same grounds. (9-ap-10021, Doc. 32.)
Two days later, on August 20, 2010, the Bankruptcy Court entered an order involuntarily converting the initial bankruptcy proceeding from Chapter 11 to Chapter 7 and appointing a trustee. (9-bk-414, Doc. 323.) That order notified Yelverton that he was required, inter alia, to file any notices of intent to exempt property or reaffirm secured consumer debts within thirty days of the conversion date or before the first date set for the meeting of the creditors, whichever came earlier. (Id.) On August 22, the Bankruptcy Court mailed Yelverton a "Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines." (9-bk-414, Doc. 327.) This notice informed Yelverton that the creditor's meeting would be held on September 23, 2010, and that "[t]he debtor . . . must be present at the meeting to be questioned under oath by the trustee and by creditors." (Id.) Yelverton was also sent a notice indicating that he was required to complete a financial management course (9-bk-414, Doc. 328.)
After the conversion to Chapter 7, Fennel opposed Yelverton's motion to dismiss because the conversion had mooted the Chapter 11 repayment plan that included provisions for repaying his loan to her. (9-ap-10021, Doc. 34.) The record establishes that Yelverton's creditor's meeting was held, as planned, on September 23, 2010. (9-bk-414, 9/23/10 MinuteEntry.) Consistent with the prior notice requiring Yelverton to attend a financial management course within forty-five days after the date set for the creditor's meeting, the Bankruptcy Court warned Yelverton, around November 24, 2010, that he needed to document completion of the course or face dismissal of his bankruptcy case "without the entry of discharge." (9-bk-414, Doc. 380.) Yelverton' filed the requisite documentation six days later, on November 30, 2010 and, on December 3, 2010, the Bankruptcy Court entered an order of discharge. (9-bk-414, Docs. 383, 384.)
Approximately three months after the discharge, on March 1, 2011, Yelverton filed a pretrial statement in the adversary proceeding in which he indicated he was "agreeable to a reaffirmation of the [Fennel] debt . . . and [asked] that it be declared Non-Dischargeable under a Reaffirmation Agreement." (9-ap-10021, Doc. 43.) The following month, on April 5, 2011, a pretrial conference was scheduled in the adversary proceeding, but the Bankruptcy Court Judge's notes indicate the proceeding was not held in anticipation of a Motion to Vacate the discharge for the purpose of reaffirming the agreement to pay Fennel. (9-ap-10021, Doc. 45.) Close to six weeks later, on May 26, 2011, the Court entered an order re-setting the pretrial conference because the motion to vacate had not been filed. (9-ap-10021, Doc. 46.) Almost a week later, on May 31, 2011, Yelverton and Fennel filed a Rule 60(b)(6) motion to vacate the discharge and approve a reaffirmation agreement as means of resolving the adversary proceeding. (9-bk-414, Doc. 396; 9-ap-10021, Doc. 48.)
On July 18, 2011, the Bankruptcy Court denied that motion. (9-bk-414, Doc. 397, 398.) In its decision, the Bankruptcy Court questioned whether it had the authority to vacate a discharge order for the purpose of approving a reaffirmation agreement: "Courts are split as to whether it is within their authority to vacate a discharge order for approval of a reaffirmationagreement." (9-bk-414, Doc. 397.) The court noted that the Bankruptcy Code precludes debtors from seeking revocation of the discharge and that reaffirmation agreements are only enforceable if made prior to the entry of a discharge. Even assuming bankruptcy courts have such authority, the Judge denied the Joint Motion because the parties failed to establish that they were entitled to relief pursuant to Rule 60(b)(6). (Id.)
First, the Bankruptcy Court found the parties had not shown that disallowing the reaffirmation would seriously prejudice Yelverton because, even in the absence of the reaffirmation agreement, Yelverton had various options. The Court noted that nothing precluded Yelverton from:
making voluntary payments to the creditor, or from fulfilling any of the other terms of the proposed reaffirmation agreement such as naming of the creditor on the debtor's life insurance policy. [Yelverton] can consent to entry of a judgment in the pending adversary proceeding, taking into account the costs and risks of litigation in arriving at a judgment amount, and the parties are free to enter into an agreement as to how the judgment will be paid, including an enforceable agreement regarding naming the creditor on the debtor's life insurance policy.
(9-bk-414, Doc. 397 at p. 10.)
Second, the Bankruptcy Court denied the Joint Motion because Yelverton had not shown that his failure to file a timely reaffirmation agreement was due to circumstances beyond his control; therefore he had not acted diligently. (See id.)
Yelverton appealed the Bankruptcy Court's decision on August 1, 2011. 2 (9-bk-414, Doc. 402.) There are currently two apparently identical actions pending in the instant Court related to his proposed reaffirmation agreement with Fennel.3 (1:11-cv-1627, Doc. 4; 1:11-cv-1649, Doc. 3.)
District Courts "may affirm, modify, or reverse a bankruptcy judge's judgment, order, or decree or remand with instructions for further proceedings." Fed. R. Bankr. P. 8013; see 28 U.S.C. §158(a). On questions of fact, the District Court reviews the Bankruptcy Court's findings under the clearly erroneous standard. Fed. R. Bankr. P. 8013. However, questions of law are reviewed de novo. In re Chreky, 450 B.R. 247, 251 (Bankr. D.D.C. 2001) (citations omitted).
As the Bankruptcy Court noted, courts are split as to whether it is within the authority of a Bankruptcy Court to vacate a discharge order for approval of a reaffirmation agreement. (9-bk-414, Doc. 398 at pp. 5-9.) Yelverton seeks relief pursuant to Federal Rule of Civil Procedure 60 4 which provides as follows:
Although Rule 60(b) allows for relief from a final order, the Bankruptcy Rules appear to limit application of Rule 60(b) where the debtor seeks to reaffirm a debt after his bankruptcy has been discharged. First, the Bankruptcy Rules provide that the Court may revoke a discharge upon the request of a trustee or creditor, but the rule does not provide for such authority upon the request of the debtor. 11 U.S.C. §§ 727(d)-(e); In re Engles, 384 B.R. 593, 598 (Bankr. N.D. Okla. 2008). Additionally, even if a debtor could revoke his own discharge, the Bankruptcy Rules present another hurdle. Reaffirmation agreements "shall be filed no later than 60 days after the first date set for the meeting of creditors." Fed. R. Bankr. P. 4008(a). While the "court may, at any time and in its discretion, enlarge the time to file a reaffirmation agreement," Fed. R. Bankr. P. 4008(a), such agreements are only valid if they are "made before the granting of the discharge" and filed with the court. 11 U.S.C. §§ 524(c)(1), (c)(3); see e.g., In re Engles, 384 B.R. at 598.
In the event that the parties are unable to file a reaffirmation agreement in a timely fashion, the rule grants the court broad discretion to permit a late filing. . . . [The Rules] accommodate[ ] such...
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